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Information-Based Trading in Dealer and Auction Markets: An Analysis of Exchange Listings

58 Pages Posted: 24 Oct 2001  

Hans G. Heidle

Division of Economic and Risk Analysis, Office of Markets

Roger D. Huang

University of Notre Dame

Multiple version iconThere are 2 versions of this paper

Date Written: August 30, 2001

Abstract

Are auction markets or dealer markets better able to identify informed traders? Our analysis of firms that transfer to an alternative exchange structure indicates that traders are more anonymous in a competing dealer market than in an auction environment. Our evidence also shows that the associated changes in the probability of trading with an informed trader are related to changes in the bid-ask spread. The reduction in bid-ask spreads are more pronounced for firms with higher probability of transacting with an informed trader prior to the relocation from a dealer to an auction market.

Keywords: Market Microstructure, Information-Based Trading, Trader Anonymity, Trading Costs, Exchange Listing

JEL Classification: G10, G14, D82

Suggested Citation

Heidle, Hans G. and Huang, Roger D., Information-Based Trading in Dealer and Auction Markets: An Analysis of Exchange Listings (August 30, 2001). Available at SSRN: https://ssrn.com/abstract=287451 or http://dx.doi.org/10.2139/ssrn.287451

Hans G. Heidle (Contact Author)

Division of Economic and Risk Analysis, Office of Markets ( email )

United States Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
United States
202.551.3615 (Phone)

Roger D. Huang

University of Notre Dame ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6370 (Phone)

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